The Future Is In Original Content

Here’s the key passage from the news that Netflix was investing 85% of its available funds on original material:

Sarandos reiterated that Netflix’s heavier focus on original and exclusive content is driven by more favorable economics — as opposed to licensing TV shows and films owned by Hollywood studios — and the expectation that big media companies would eventually put more weight into their own streaming-subscription services.

There’s a lot that could be said – and has been, by myself and others – about how the dynamics of the media industry have changed, are changing and will continue to change. Phrases like “media fragmentation” are used often as more and more options for consumers to choose from arrive on all platforms, whether it’s via a home-based or mobile connected device. Two things are clear, though:

#1: Everyone is out for original content

That’s a point that’s been hammered home on many occasions. Netflix is producing or buying more and more original shows and movies. Same goes for Hulu, Amazon and even Apple. These companies are placing the same bets HBO, Showtime, TNT and other cable channels have for years. Each one hopes that even if the shows or movies aren’t award-winning prestige material (though there’s a heavy dose of that as well, exemplified by not only “Game of Thrones” but how Amazon is searching for its own version of that show) they’re good enough to keep people’s attention and convince them to become or remain subscribers. A recent survey ranked which services people thought had the best original content, with Netflix coming out as the clear winner.

That original content, then, supplements the catalog material offered by each channel. As each media company launches or plans for the launch of their own OTT subscription service, they’re often reclaiming their back catalog from whoever they’ve previously licensed it to as soon as those contracts expire. WB pulled “Buffy, the Vampire Slayer” and other shows off Netflix so it they could be exclusive to Hulu, which it has a stake in. Disney will be letting its Netflix contract lapse as it seeks to build out its upcoming service. There are a number of other examples, though there will likely always be some material that’s licensed out to other players in the game.

It’s important to note that this isn’t just a trend in the entertainment industry. Target, according to a recent report, has brought in a lot of shoppers with its new exclusive brands and other offerings. As “house brand” has become less associated with “generic” and is seen as better able to compete with other products on both quality and prestige, retailers like Target are ramping up those products. When Target, Walmart, Meijer and other big-box retailers all sell the same national toothpaste and dishwasher liquid, they seek to differentiate themselves in other ways. As direct-to-consumer brands, facilitated by online shopping and bespoke boutique physical locations, become more popular, exclusive products become a powerful competitive feature, giving shoppers a clear reason to choose to shop at this store, not that one.

So everyone, then, is adopting some variation on what I’ll call the “HBO Model,” a mix of licensed and original content. That means how we talk about things will matter more and more, which brings me to my second point.

#2: We’re going to need some new terminology

If we accept that Netflix, CBS, Disney, Apple, Amazon, Crackle and others are all playing the same game, we then need to look at how the platform on which they operate determines the terminology with which we refer to them. And since the platform question is increasingly answered by “all of them,” that becomes a tricky task, though one that’s still necessary to address if we’re going to have intelligent discussions.

Consider how HBO Now is only used by about 10% of its U.S. subscribers according to a Bloomberg story from February. That service, though, is available on a number of platforms. The same can be said of Netflix, Amazon Prime and other services. Apple’s iTunes service is really the only one that doesn’t cross platform lines, available exclusively on Apple devices with the exception of PCs.

So is HBO a streaming service in the same way we would apply that label to Netflix? Is Amazon a cable company because of how it offers “channels” to different media companies, allowing consumers to subscribe to those individual outlets? A recent survey indicated customers were much happier with streaming subscription options and content than with their traditional cable subscriptions, so things are coming to a head as the one begins to increasingly look like the other and vice versa.

I don’t know what those new terms and labels are, but they’re going to be needed in the same way we need a new word for “TV” that doesn’t comes with the baggage of being intrinsically tied to distribution technology. If you have thoughts, leave them in the comments or @ me on Twitter.